On June 25th, the State Administration of Press and Publication website released information on domestic online game approvals for June 2024, with 104 domestic online games approved. This marks the fifth time the number of domestic online game approvals has exceeded 100. The first four were 105 in December 2023, 115 in January 2024, 111 in February 2024, and 107 in March 2024. Haitong Securities believes that the demand for the game market is still strong. As the approval process enters normalcy, major game developers' high-quality supply is expected to continue to be released, driving the industry's prosperity. In addition, we are bullish on the trend of AI application, and the landing of AI terminals is expected to bring wider user demand scenarios. We focus on the Internet and game giants with high-quality product reserves.
Specifically, the 104 domestic online games approved this time include Tencent's "Luokewangguo: Shijie" and Shenzhen ZQGame's "Adeweitu", "Extraordinary 0516", "All-Star Awakening", "Time Order", G-bits Network Technology's "Daoyou Lai Wabao", and Asia Vets' "Douluo Dalu: Liehun Shijie", among others.$Shenzhen Zqgame (300052.SZ)$The works include "Advetoo", "Extraordinary 0516", "All-Star Awakening", "Time Order"$G-bits Network Technology (603444.SH)$The works include "Digging for Treasure with Fellow Daoists" and "Wen Sword Longevity"$37 Interactive Entertainment Network Technology Group (002555.SZ)$According to Game New Knowledge, it is developing two AI games: "AI Apartment: Virtual Testimony" and "AI Detective Collection". "AI Apartment: Virtual Testimony" is the world's first script-killing game driven by GPTAI. AI is involved in all aspects except for storyline setting. It includes videos and has now opened for appointments on platforms such as Steam and TapTap.
Since the beginning of this year, game version number issuance has maintained a frequency of one batch per month. So far this year, a total of 689 new games (including 61 imported games) have obtained version numbers, compared with 549 version numbers (including 27 imported games) issued in the same period last year.
From an industry perspective, there were fewer new games in the Q1 2024 game sector, and the overall market sentiment was somewhat tepid, but the market size increased instead of decreasing according to data. According to data from the Game Industry Committee, the market size of the game sector in Jan-March 2024 increased year-on-year, and only slipped 1.93% year-on-year in April. The market size for the first four months reached RMB 95.1 billion, a year-on-year growth of 5.63%, higher than the Q1 5.3% GDP growth rate. At the same time, AI games continue to land, and the game industry transformation driven by AI is getting closer.
According to Game News, Perfect World is developing two AI games: "AI Apartment: Virtual Testimony" and "AI Detective Collection." "AI Apartment: Virtual Testimony" is the world's first script-killing game driven by GPTAI. Except for the plot setting, all other content is produced by AI, including video. It has now been pre-ordered on platforms such as Steam and TapTap.
According to new gaming knowledge,$Perfect World (002624.SZ)$In addition, AI provides more possibilities for personalized plots and NPC design, etc., and is expected to further optimize users' immersive experiences. Currently, domestic works that use AI to achieve gameplay innovation include "Nishuihan," which uses AIGC to achieve high-intelligence NPC, AI portrait, AI poetry and painting creation, AI plot interpretation and other in-game intelligent experiences.
In addition, AI also provides more possibilities for personalized plotlines, NPC design, and other aspects, further optimizing users' immersive experiences. At present, domestic games that use AI to achieve gameplay innovation include Netease's "NieR: Automata," which features high-intelligence NPCs, AI face creation, AI-created poetry and painting, and AI story interpretation within the game.
With the continuous iteration of AIGC technology, the cost reduction and efficiency improvement effects brought by AI will become more pronounced, and commercial-level native AI games are getting closer and closer. The integration of AI and games is expected to create new gameplay and gaming experiences, further opening up game monetization space.
Additionally, Asia Vets also offers more possibilities for personalized storylines, NPC design and other aspects, which is expected to further optimize users' immersive experience. Currently, domestic works that use Asia Vets to achieve gameplay innovation include:$NetEase (NTES.US)$Nishuihan uses AIGC for the first time to achieve high-intelligence NPCs, AI face creation, AI poetry and painting creation, AI plot interpretation and other intelligent experiences in the game.
Guotai Junan believes that with the normalization of version number supply and the gradual opening of product supply in the game market, the overall game industry is at a valuation low point. Companies with rich and quality content reserves and solid fundamentals will be the first to recover.
Tencent Holdings (00700): It is expected that in the second quarter, the new mobile game "DNF" and other old games such as "King of Glory" will recover, and with reference to the 23% quarter-on-quarter growth of deferred income in the first quarter, game revenue is expected to accelerate growth. With the gradual release of new games, it is expected that the growth rate of game revenue will bottom out and rebound, and the development of the small game business is also worth looking forward to.
Zhejiang Securities stated that with the normalization of version number supply and the gradual opening of product supply in the game market, the overall game industry is in a valuation low point. Companies with rich and quality content reserves and solid fundamentals will be the first to recover. It is now a good opportunity to invest in the game sector on the left side, especially given the important catalyst in June.
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$TENCENT (00700.HK)$It is expected that game revenue will accelerate its growth, driven by the online launch of new games such as "DNF" mobile game and the recovery of many old games such as "King of Glory" in the second quarter. With the continuous launch of new games, the growth rate of subsequent game revenue is expected to bottom out and rebound. The development of small game business is also worth looking forward to, with a 23% increase in deferred revenue compared to the first quarter.
$NTES-S (09999.HK)$The hand game continues its strong growth momentum, with many games reaching new highs. The company's 1Q24 game revenue was 20.4 billion yuan, a year-on-year increase of 10%, with hand game revenue increasing by 19% year-on-year, continuing its strong momentum, mainly driven by game products such as "Nishuihan" and "Danzai party". The third quarter will usher in a new round of new game cycles. In addition, it is expected that the return of Blizzard games in the future will also bring incremental revenue to the company.
$BILIBILI-W (09626.HK)$After the hand game "Three Kingdoms: Planning for the World" went online, it reached the third place on the iOS best-selling list and is expected to drive the growth of game revenue for the whole year. During B station 618, the GMV of the dealer increased significantly year-on-year, and the platform's monetization capability continued to improve.
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